| | | | | | | Banking Sector Outlook for 2017 In the first of a two-part series, this report covers the sector and its main players ahead of a barrage of full year results releases. We take an in-depth look at how US & UK Banks fared during 2016, reporting dates and forecasts for 2017, and what early US results have shown us. Get your copy of the Banking Sector Outlook for 2017 today! Losses can exceed deposits | | |
| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London close: Stocks finish higher after better-than-expected UK data London stocks closed the session higher on Friday as investors weighed better-than-expected UK economic data on trade and industrial production.
The FTSE 100 closed up 0.40% to 7,258.75 points. The pound climbed 0.01% against the dollar to $1.2498 and rose 0.15% versus the euro to €1.1745.
Oil prices were also higher after the International Energy Agency raised its forecast for global oil demand and said it expected OPEC's promise to lower output will be delivered by its members. The IEA upgraded its estimate for 2017 demand growth to 1.4m barrels a day, from 1.3m barrels forecast in its January report.
Brent crude jumped 2.09% to $56.82 per barrel and West Texas Intermediate increased 1.9% to $54.07 per barrel at 1655 GMT.
On the data front, UK trade deficit narrowed to £8.6bn in the fourth quarter from £14.1bn the previous quarter, boosted by an increase in exports to countries outside the European Union, the Office for National Statistics said.
In December, the deficit on trade in goods and services was scaled back to £3.3bn from £3.6bn, which the ONS said contributed to the narrowing in the fourth quarter. Analysts had expected a deficit of £3.5bn.
Separately, ONS revealed industrial production increased 1.1% in December compared to a month ago, driven by an increase in manufacturing. Economists expected a 0.2% rise.
On the year, industrial production jumped 4.3% in December, exceeding estimates for a 3.2% rise.
Manufacturing output climbed 2.1% in December from a month ago and 4% from the same month a year ago, ahead of forecasts for a month-on-month increase of 0.5% and a year-on-year gain of 1.7%.
Construction output edged up 1.8% month-on-month in December, compared to estimates for a 1% rise, and grew 0.6% year-on-year, compared to estimates for a 0.5% fall.
"Today's economic activity data added to other evidence suggesting that the economy maintained a significant amount of momentum at the end of 2016 and implies that GDP growth is becoming more balanced," according to Capital Economics.
Meanwhile, the NIESR said UK economic growth accelerated in the three months to January from the previous quarter, driven by strong consumer spending and improvement in production industries.
The NIESR estimated gross domestic product rose 0.7% in the quarter to January, compared to 0.6% growth in the three months to December.
However, the research institute said it sees economic growth softening to 1.7% this year as rising inflation weighs on consumer spending. GDP rose 2.0% in 2016, easing from 2.2% in 2015 and 3.1% in 2014, according to the latest official figures.
In the US, official figures showed the cost of imported goods rose 0.4% in January from a month ago, following a revised 0.5% in December. Economists had expected a 0.2% rise.
Another survey showed US consumer confidence fell more than anticipated in February as expectations for future economic conditions weakened.
The University of Michigan's preliminary estimate for the consumer sentiment index came to 95.7 in February, down from 98.5 in January and compared to economists' forecasts of 97.8.
In corporate news, mining shares rallied on the back of the positive UK data with Anglo American, Rio Tinto and Antofagasta in the black.
Dunelm Group advanced as Numis upgraded the stock to 'buy' from 'add' and reiterated a target of 825p.
Elementis gained as it entered into an agreement to acquire specialty chemicals platform SummitReheis from an affiliate of One Rock Capital Partners for an enterprise value of $360m
Reckitt Benckiser slumped as the company announced it has agreed to buy US baby formula maker Mead Johnson for $16.6bn and as it reported weaker-than-expected sales in the fourth quarter due to declines in Europe and North America.
Royal Bank of Scotland was on the back foot as it rejected calls to expand a £400m scheme to reimburse customers who claim they were mistreated by the bank's restructuring division.
Just Eat tanked after saying David Buttress had informed the board of his intention to step down from his role as chief executive officer due to urgent family matters.
Greene King's shares fell as Canaccord Genuity reiterated a 'buy' rating after the pub operator's third quarter trading update, but cut the target to 850p from 900p and lowered its earnings guidance. |
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| Market Movers
FTSE 100 (UKX) 7,258.75 0.40%
FTSE 250 (MCX) 18,715.36 0.47%
techMARK (TASX) 3,345.76 0.37%
FTSE 100 - Risers
Rio Tinto (RIO) 3,572.50p 5.63%
Antofagasta (ANTO) 866.00p 4.65%
Anglo American (AAL) 1,352.50p 4.40%
Glencore (GLEN) 320.75p 2.74%
BHP Billiton (BLT) 1,370.00p 2.39%
Capita (CPI) 525.00p 2.34%
Rolls-Royce Holdings (RR.) 732.50p 2.02%
BAE Systems (BA.) 612.00p 2.00%
Old Mutual (OML) 211.20p 1.78%
Fresnillo (FRES) 1,556.00p 1.77%
FTSE 100 - Fallers
Reckitt Benckiser Group (RB.) 7,025.00p -2.96%
Royal Bank of Scotland Group (RBS) 228.90p -1.80%
Convatec Group (CTEC) 240.30p -1.52%
Smith & Nephew (SN.) 1,186.00p -1.00%
Hikma Pharmaceuticals (HIK) 1,937.00p -0.92%
3i Group (III) 714.50p -0.83%
Sainsbury (J) (SBRY) 264.60p -0.79%
Lloyds Banking Group (LLOY) 65.64p -0.76%
Worldpay Group (WPG) 272.00p -0.73%
Vodafone Group (VOD) 197.70p -0.70%
FTSE 250 - Risers
Elementis (ELM) 300.70p 9.27%
Kaz Minerals (KAZ) 570.50p 8.67%
Nostrum Oil & Gas (NOG) 459.70p 5.39%
Aberdeen Asset Management (ADN) 268.20p 5.38%
Dunelm Group (DNLM) 650.00p 5.26%
Ferrexpo (FXPO) 163.00p 5.23%
Ashmore Group (ASHM) 350.00p 4.48%
Berendsen (BRSN) 938.50p 4.45%
Vedanta Resources (VED) 1,081.00p 3.54%
Amec Foster Wheeler (AMFW) 460.40p 3.53%
FTSE 250 - Fallers
Just Eat (JE.) 518.50p -6.49%
Electrocomponents (ECM) 475.50p -5.65%
Dairy Crest Group (DCG) 557.50p -3.38%
Greene King (GNK) 678.50p -3.21%
Essentra (ESNT) 434.30p -2.34%
Senior (SNR) 193.50p -2.32%
Shawbrook Group (SHAW) 260.50p -1.96%
CLS Holdings (CLI) 1,627.00p -1.69%
OneSavings Bank (OSB) 356.60p -1.65% |
| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Strong miners offset weak periphery European equity markets were mixed on Friday as the Greek debt crisis weighed on investors' minds, although miners were boosted following encouraging Chinese trade figures.
The benchmark Stoxx Europe 600 index was 0.16% higher at the end of trading to 367.39, Germany's DAX was up 0.21% to 11,666.97 and France's CAC 40 edged higher 0.04% to 4,828.32.
Meanwhile, oil prices ticked higher, with West Texas Intermediate up 1.99% at $54.07 a barrel and Brent crude ahead by 2.1% at $56.81.
Investors were keeping a closer eye on developments in Greece. Analysts at Monex Europe said: "The Greek debt crisis was once again in headlines, with spreads between Greek sovereign debt and other Eurozone countries once again showing investor caution. German Finance Minister Wolfgang Schäuble reiterated previous statements calling for Greece to reform or leave the Eurozone.
"Reports circulated that Greece's creditors would prepare a new series of proposed austerity measures for presentation today, meaning the 20 February meeting of Eurozone finance ministers could see a possible resolution, or escalation, of this latest stage in the ongoing drama."
Those reports drove the yield on the two-year Greek government bond to 8.59% on Friday from the 10.06% level where it was trading at by end of play on Thursday.
Elsewhere, mining stocks got a lift after data released earlier showed Chinese exports rose 7.9% in January in dollar terms, marking the fastest pace in almost two years, while imports rose 16.7%. Both sets of figures beat economists' expectations.
Basic resources were the standout gainers, with the Stoxx 600 sub-index for the sector up 3.69% as copper prices were boosted by supply concerns after the Chinese trade data suggested a strong demand outlook for the metal.
Results from steel giant ArcelorMittal also underpinned gains in the sector, as it said 2016 earnings rose to $6.3bn from $5.2bn the previous year. Shares in the Luxembourg-based miner rose 9.34%.
French car maker Renault gained 1.02% after it said profit jumped 38% in 2016, while Reckitt Benckiser fell 3.60% as it confirmed that it would buy US infant formula-maker Mead Johnson for $16.6bn.
Luxury brand Kering rose 3.85% after its 2016 profit beat analysts' forecasts, but Belgian car parts maker Umicore sank 5.51% as it posted a mere 1% increase in full-year revenue.
Commerzbank fell 2.13% after S&P Equity Research downgraded the German bank to 'strong sell' from 'hold'.
On the data front, Italy's annual industrial production, which accounts for little under a third of the country's GDP, grew at its fastest pace since 2010 as overall output rose 1.6% in 2016. |
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| | US Market Report | | US open: Stocks higher as investors await 'phenomenal' Trump tax plan US stocks traded higher on Friday after President Donald Trump promised to make a "phenomenal" announcement about his tax plans soon and that he would stand by the 'one China' policy concerning Taiwan.
The Dow Jones Industrial Average was up 0.3% to 20,231.98, the S&P 500 gained 0.23% to 2,313.09 and the Nasdaq was 0.17% higher to 5,724.65 at 1517 GMT.
Michael Hewson, chief market analyst at CMC Markets, said: "US markets picked up where they left off yesterday, opening at new record highs with bullish sentiment getting reinforced by reports that US President Trump had spoken to Chinese President Xi and that he would stand by the 'one China' policy that had been the baseline for US foreign policy for many years.
"This apparent change of tack would appear to suggest that the new administration could well be starting to adopt a more pragmatic softly, softly approach to foreign policy. Maybe President Trump is slowly realising that he can't win every battle and that to try and do so is unrealistic."
After his election victory, Trump took a phone call with Taiwan's president, angering Beijing which claims Taiwan is part of China. Washington cut diplomatic relations with Taiwan in 1979 when it recognised China.
On Thursday, indices reached record closes after Trump said he was planning the most ambitious tax reform since the Reagan era in the next few weeks, although he stopped short of giving any details.
White House spokesman Sean Spicer said the president would outline a comprehensive tax plan, including cuts for individuals and businesses.
Craig Erlam, senior market analyst at Oanda, said: "US President Donald Trump has started making the right noises again as far as markets are concerned, with Thursday's promise of a 'phenomenal' tax announcement in the coming weeks certainly hitting all the right notes.
"Investors have become a little apprehensive in recent weeks due to the unpredictable nature of Trump's policies and the timing of the announcements which has taken the edge of moves we saw heading into year end."
In currency markets, the dollar gained as Trump met with Japanese Prime Minister Shinzo Abe, which lowered the yen.
The greenback was 0.26% stronger against the yen to 113.54, was up 0.35% against the pound to 0.8031 and rose 0.3% versus the euro to 0.9413.
Meanwhile, yields on the 10-year Treasury bond were up two percentage points to 2.41%.
Oil prices ticked higher, with West Texas Intermediate up 1.54% at $53.83 a barrel and Brent crude up 1.52% at $56.49.
On the corporate front, Sears jumped 30.43%, on track to be its best one day rise since November 2014, as the department store unveiled plans to cut its debt and pension costs by at least $1.5bn.
Mead Johnson gained 5.01% after London-listed consumer goods group Reckitt Benckiser announced the acquisition of the baby food maker for up to $17.9bn.
Nvidia fell 2.26% despite reporting record revenue growth on Thursday.
Candy Crush Saga maker Activision Blizzard surged 13.7% after announcing a stock buyback and the lifting of its dividend, despite disappointing quarterly numbers.
Western Union fell 5.2% after the payments company reported a $355m fourth quarter loss, but beat earnings expectations.
On the data front, the US import price index rose to 0.4% in December from 0.5% the previous month which was revised up from 0.4%. This was more than the 0.2% expected. |
| | Broker Tips | | Broker tips: Dunelm, Sage, Greene King Dunelm Group's shares advanced on Friday as Numis upgraded the stock to 'buy' from 'add' and reiterated a target of 825p.
The homewares chain on Wednesday reported a 26% fall in pre-tax profit to £55.9m in the first half, blaming a weaker market and a temporary disruption to supply following its recent acquisition of Worldstores. Margins were also hurt by a weaker pound following the Brexit vote last June.
Like-for-like sales dropped 1.6% during the 26 weeks to 31 December and the company said market conditions remained "challenging", particularly in homewares.
"Despite the tougher current backdrop for Homewares, which is likely to result in limited near-term growth in core Dunelm, with the shares now trading on a sector multiple (11.5x FY18 PE) we see value, given the quality of Dunelm's core operation alongside the growth opportunity afforded by the integration of Worldstores' capabilities," Numis said.
Numis said the first half pre-tax profit was "largely consistent" with its estimate. The broker also highlighted Dunelm's growth initiatives, including strong online progress, three new in-London stores, three new store refits trading strongly, development of the furniture offer, substantial supply chain and logistics upgrades, and investment in new ranges.
"While these measures are difficult to quantify individually, management is confident that, in aggregate, they will be sufficient to support the business' medium-term target of growing sales by 50%," Numis said.
"Providing some support, the business continues to take market share, despite the impact of supply chain disruption on trading."
Exane BNP Paribas has upgraded software group Sage to 'outperform' from 'neutral' and lifted price target to 750p from 640p.
The bank noted that Sage has de-rated on uninspiring top-line trends, including a slight hiccup in the first quarter of 2017, and perhaps the lower attraction of defensive cash return stories.
The stock has been the worst performer in European software on both a three- and 12-month view, despite strong earnings per share upgrades, and is now trading at an EV/EBITA calendar 2017 earnings of 13.8x, or a 16% discount to peers.
Exane said the recent issues such as those in France can be fixed, which should get Sage back to its targeted organic growth of more than 6% as soon as the second quarter.
"Moreover, recent go-to-market investments should produce benefits in the coming years. Sage has launched a £100m cost-cutting programme. The savings will be reinvested in the business in the short-term, meaning margin progression should remain limited in FY17.
"Longer-term, however, some of the savings (we estimate 1/3) should flow back at the EBIT level. We forecast a 200 basis points margin expansion from FY17e (27%) to FY19e (29%)."
Greene King's shares fell on Friday as Canaccord Genuity reiterated a 'buy' rating but cut the target to 850p from 900p and lowered its earnings guidance.
The pub operator reported strong trading over the Christmas period on Friday as it sounded a confident note on its outlook.
In the 40 weeks to 5 February, like-for-like sales grew 1.1%. Excluding Fayre & Square, LFL sales were up 1.6% over the period.
Over the last 16 weeks, the company said it had seen strong Christmas trading, alongside the usual quieter months of November and January.
In the three weeks over Christmas, LFL sales were up 4.5%, despite tough comparisons with the previous Christmas, with sales driven by particularly strong growth in London. Greene King said it broke its record for Christmas Day again, with sales up 6% on the previous year to £7.4m.
Greene King said it made further progress on the Spirit integration, with over 1,000 pubs now converted to the 'best of both' Pub Company IT system and ongoing synergy savings realised.
"It's disruptive and hard work to stitch two big companies together but investors should not lose sight of the goal that Greene King is after," Canaccord said.
"Greene King and Spirit together is a much better investment proposition with higher quality earnings, stronger FCF and better growth prospects than before."
Canaccord said it remains positive on the Spirit integration where synergies continue to come through. The broker expects synergies of £30m this year, which puts the company on track to achieve the original three-year target in two years. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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